Evasion, sops hit excise mop-up, admits FM

Tax exemptions to go, banking cash transaction tax to be reviewed.

Finance Minister P Chidambaram today blamed tax evasion and exemption for the lower growth in excise duty collections.

Excise revenues have grown 8.1 per cent, 12.6 per cent and 5.9 per cent, respectively, in the last three years and have not kept pace with the growth in the manufacturing sector.

"I suspect the reasons are both tax evasion and tax exemption," Chidambaram told Parliament today.

Excise collections of Rs 1,17,250 crore in 2006-07 fell 1.47 per cent short of the Budget estimate of Rs 1,17,967 crore.

Keeping this in mind, the growth target for excise collection had been kept at 10.09 per cent for 2007-08 and efforts would be made to achieve it, the finance minister said.

The government collected Rs 4,71,742 crore in gross tax revenue for 2006-07, beating the Budget estimate by Rs 29,589 crore and the revised estimate by Rs 3,894 crore. Chidambaram attributed this to expansion of tax bases, and better tax administration and compliance. The tax-to-GDP ratio has increased to 11.5 per cent from 9.2 per cent in the last three years and is likely to further improve to 11.8 per cent in 2007-08 due to the boom in the economy and better tax collections.

On education cess, which was collected at the rate of 2 per cent on the total tax amount, Chidambaram said the revised collection estimate was Rs 8,973 crore for 2006-07. The Budget estimate in 2007-08 is Rs 15,592 crore.

The minister said stable and moderate tax rates had pushed up savings and investment rates. The savings rate increased from 29.7 per cent in 2003-04 to 32.4 per cent in 2005-06 and the investment rate went up from 28 per cent to 33.8 per cent.

The finance minister indicated that tax exemptions would have to go as the country moved towards a Goods and Service Tax from April 1, 2010.

He said the Banking Cash Transaction Tax would be reviewed next year.